Leader Week in Review
April 17, 2015
Economic Data Releases:
The yield curve flattened as yields declined across the curve last week. MBS spreads were wider by 3 bps on the back of higher underlying mortgage rates. Credit spreads also increased marginally during the week. Normally a month where Retail Sales are up 0.9% would be viewed positively by markets, however, after declining -0.8% in January and -0.5% in February, Retail Sales aren’t even back to flat this year. The “bonus” from lower gas prices have yet to translate into spending.
Pick your preferred core inflation measure, but it has recently hooked up (chart 1). While not enough yet for the Fed to hike rates in June, it is encouraging for inflation to move back towards the Fed’s 2% target. A few comments on the insanity of yields in Europe – yields on German Bunds are so low that the ECB can’t even buy them out to 4 years on the curve (the €1.1 trillion purchase program is not permitted to buy bonds yielding less than the ECB deposit rate of -0.2%). Of the eligible German Bunds, roughly €600 billion of the €1.1 trillion of Bunds outstanding, the ECB will purchase 45%. Simply stunning – Bund yields have nowhere to go but lower.
Upcoming Economic Data Releases: